7min Watch

Building your Marketing Agency for your Goals

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One of the models I see as really popular is you build an agency. You step away, you have your number to run the organization and you turn out like a cash cow.

In other words, you build the agency up, you have your systems and processes documented. You’ve got a consistent plan to get new business.
You’ve got all the business set up, ready to run, and you transition. Now focus on other things, do something new in your life, but you own this asset.

This agency, you sit on the board and it makes you money every month. Tons of examples of this awesome option, lots of great people doing it.

Another option is you just die at your company. Pretty much like you just keep building it, you know, work in it daily and you just grind it out. You make a big old check.

You got your salary, you have your owner’s draw and you just run this thing, right? You save on other costs.

Cause you’re personally in the business, you run it. Another option. Plenty of people do that. Option. Third option is you sell, you, build it up and you sell it.

Now where the third option gets unique is how and who you sell to. So let’s talk about the two options of selling.
One option. You sell to another shop. You sell to another agency. Maybe they put you on a two year earn-out you sell to them.

The other option, the one I’m most passionate about, not that the others are bad or anything. It’s just my choice is you try to become a platform company.

And that is you sell to a private equity group.
When you sell to a private equity group, you become what’s called a platform company. What this means is you sell your company.

The majority share maybe 50.1% to ownership or more. You know, whatever’s on the table, maybe sell 75%, 80% to a private area.
You then get their money, capital injection. You go out and buy other shops that you bought into yours. So instead of an agency buying you, you buy other agencies and then you package that whole new company up and you sell to another private equity company.

And this scenario, your second check when you sell the company, the second time is usually bigger than the first. And a lot of times you transition out at this point.

So maybe on the first one, you’re still CEO. By the second time, you’re probably a chairman on the board and you’re transitioned out, okay, that’s called going the route of building a platform company.
Now, if you want to build a platform company, I’ve talked a lot of different bankers and different private equity groups.

Here’s some stuff to think about. And this is coming from people who’ve done some of the biggest deals. Yeah. Last three years.
Okay. You’re going to want around $5 million in EBITDA. I don’t know. Y exactly. Other than that’s what, what’s the beak of the right private equity groups.

Okay. So we’ve got to make $5 million a year, trailing 12 months. Number one, number two, like I said earlier, they want traditionally control.
So they’re gonna require more than 50% ownership. Number three, they want 20 to 30% year over year growth with 20 to 25% net margins.
Okay. 25% on the high end, 22 to 20% on the low end, you gotta be a ball of 20% on your net.

Yeah. Income, for least usually trailing 24 months. So you can’t just like cut all your staff, like look how profitable we are.

Like they want to see your business can grow at 30% at those margins. Okay. They want to annual gross retention of revenue of 85%.

In other words, if January, 2020, you have 85% of the revenue you had in January of 2020 in January of 2021 from the same clients, that’s a very hard to do, but that’s the best of the best are able to accomplish.

They also want to understand your services and your size of accounts. So if you have your books right now, and you don’t have revenue by business unit or service line or types of accounts, enterprise, small business, mid-market start breaking that up and tracking a part of their investment will say, if we give you X amount of money, could you grow Y part of your business?
See, so they want to understand how the different pieces are profitable or unprofitable growing, not growing. And they can understand your, how your, how you run.

Lastly, if you do all this, you can get around an eight X, multiple of EBITDA. In other words, you can sell your $5 million EBITDA for $40 million and you won’t get all that upfront.

A lot of times you’re gonna have to have an earn-out. They’re going to want you to invest some of your money back into the whole pro platform company, so that your invested, when they sell to the other private equity group at a higher amount, and there’s a lot of nuances, I’d be happy to chat more about it with you, but those are your three options, right?
Build it, transition out, let it be a cash cow, build it, sell to someone else and leave or three, build it, sell it, become a platform company and try to grow or go that route.

Okay. So hopefully that helps has been informative video and have a great day. Thanks. Y’all.

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Other Thoughts

1min Watch


I run an agency in the low-mid seven figures. But I work with Garrett in order to get to eight-figures. When you work with people who have done exactly what you want to do, you will get there faster.


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